Gold edged higher on Thursday, retracing some of Wednesday’s corrective losses. Another contraction in durable goods orders and a rise in initial jobless claims unwound some of the optimism associated with yesterday’s better than expected new homes sales print.
The dollar index fell from a two-week high of 80.58 on the heels of the data, helping to underpin gold. Initial jobless claims for last week rose by 14k to 348k, above expectations of 335k. Durable goods orders fell by 1.0% in January. While this was in line with expectations, December’s big drop was revised even lower to -5.3% (was -4.2%).
The durable goods orders data solidifies the expected downward revision to Q4 GDP that comes out tomorrow. The preliminary read was +3.2%, but consensus favors a negative revision to +2.5%. Pretty clearly though, the momentum and enthusiasm associated with Q3-13 GDP of +4.1% has faded.
Recent claims data suggests there is also downside risk for next week’s NFP report. Median expectations for February payrolls remains at 173k for now and the jobless rate is expected to hold steady at 6.6%.
Rising uncertainty about the true health of the U.S. economy is going to increase speculation that the Fed might pause the taper, and perhaps even un-taper. “Asset purchases are not on a preset course,” reiterated Fed chair Janet Yellen before the Senate Banking Committee today. She went on to add that “if there’s a significant change in the outlook, certainly we would be open to reconsidering…”
Yellen suggested that recent weakness in the economy “may reflect adverse weather conditions”. You may recall that her original Senate testimony was cancelled two weeks ago because of snow.